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Real-Time Time-Varying Equilibrium Interest Rates: Evidence on the Czech Republic


  • Roman Horv??th



This paper examines (real-time) equilibrium interest rates in the Czech Republic in 2001:1- 2005:12 estimating various specifications of simple Taylor-type monetary policy rules. First, we estimate it using GMM. Second, we apply structural time-varying coefficient model with endogenous regressors to evaluate fluctuations of equilibrium interest rate over time. The results suggest that there is substantial interest rate smoothing and central bank primarily responds to inflation (forecast) developments. The estimated parameters seem to sustain the equilibrium determinacy. We find that the equilibrium interest rates gradually decreased over sample period to the levels comparable to those of in the euro area reflecting capital accumulation, smaller risk premium and successful disinflation in the Czech economy.

Suggested Citation

  • Roman Horv??th, 2006. "Real-Time Time-Varying Equilibrium Interest Rates: Evidence on the Czech Republic," William Davidson Institute Working Papers Series wp848, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2006-848

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    References listed on IDEAS

    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
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    Cited by:

    1. Yüksel, Ebru & Metin-Ozcan, Kivilcim & Hatipoglu, Ozan, 2013. "A survey on time-varying parameter Taylor rule: A model modified with interest rate pass-through," Economic Systems, Elsevier, vol. 37(1), pages 122-134.

    More about this item


    equilibrium interest rates; Taylor rule; augmented Kalman filter;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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